The Wolf Den #825 - Bitcoin And War
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In This Issue:
Bitcoin And War
Bitcoin Thoughts And Analysis
Fed Dovish Today - But We Have A Lot More Fed Jawboning To Come This Week
Is Bitcoin Evolving?
Robert F. Kennedy Jr. Goes Independent
Israel Under Attack | Global Financial Markets Risk Major Uncertainty | Macro Monday
Bitcoin And War
Before we delve into today's topic, I want to reemphasize the profound privilege of discussing financial markets, while the lives of entire populations hang in the balance of life and death. This privilege should never be taken for granted. Currently, my thoughts are predominantly consumed by the ongoing conflict and its associated violence, pain, and suffering, but in the back of my mind, there remains a flicker of hope - Bitcoin. This digital currency serves as a symbol of resilience, and it is this hope that compels me to stand at my keyboard and work.
I know that Bitcoin can’t fix this conflict or many of the world's other problems, but I stand by what I said yesterday - Bitcoin is a tool for hope, peace, and freedom that will thrive in any environment. Let’s focus on that.
There is a grand total of one-breaking crypto news story right now… and it might be this way for a while. I doubt Coinbase, or any company crypto company for that matter, wants to post ‘exciting news and announcements’ while the world is holding its breath. The lack of news had me thinking that we have never seen Bitcoin during a true time of war (which we are not yet in). We know that, in theory, Bitcoin performs incredibly well as a last-resort currency. Do you recall the stories of when Russia invaded Ukraine in 2022 and Bitcoin acted as a critical lifeline for Ukrainian people?
But how does it fare otherwise? The best way to answer this question would be to look to gold.
There is no guarantee that if part of the world goes to war, gold automatically rises. The performance of gold during times of war can vary depending on several factors, including the nature of the conflict, the overall economic and geopolitical situation, and investor sentiment. Gold, like Bitcoin to some, is often considered a ‘safe-haven’ asset, which means that it tends to retain its value or even appreciate during times of uncertainty, including wartime. In addition to gold being a ‘safe-haven’ asset, here are some ways in which gold can be influenced by war: currency depreciation, supply disruption, government confiscation, and market dynamics.
Let’s now look at the numbers. Please note that these are rough estimates.
WWI - Gold appreciated by about 100%.
WWII - Gold appreciated by about 40%.
Korean War - Gold appreciated by about 5-10%.
Vietnam War - Gold appreciated by about 300%.
Gulf War - Gold appreciated by about 10%.
Iraq War - Gold appreciated by about 200%
From a statistical standpoint, gold indeed tends to perform well during prolonged periods of instability and uncertainty. However, it's important to note that there are no guarantees in financial markets. External factors, including interest rates, economic data, and central bank policies, all exert their influence, alongside the scale of the conflict and the parties involved.
One crucial point to emphasize is the potential impact of Bitcoin's broader recognition as a global currency. In such a scenario, refugees would finally have the means to retain value in their pockets, on their cellphones, or even in their memory (via a seed phrase). Additionally, conflicts financed primarily through inflation by governments would face more significant hurdles. While Bitcoin isn't a panacea, it certainly offers substantial relief in many regards.
As the conflict intensifies, Bitcoin will continue to operate in its own sphere and, to be honest, I won’t pay much attention. My thoughts remain firmly fixed on other pressing matters, but Bitcoin quietly lingers in the background, as a glimmer of hope. I recognize this because no other asset seems worthy of discussion at this moment, but Bitcoin stands apart; it embodies a sense of peace in a broken world.
Bitcoin Thoughts And Analysis
We all know that Bitcoin is boring and there’s really nothing to see for the moment, right? RIGHT!?
So for fun, let’s zoom into the 4-hour chart and look at it from a supply/demand perspective. When using this simple technique, you draw demand zones off of the last “down candle” before a large move up, which is the blue zone. You draw supply by taking the last up candle before a major move down. This is the red zone.
You can see that this often gives us well defined areas of support and resistance to trade.
It is worth learning this technique - many traders solely use this.
Fed Dovish Today - But We Have A Lot More Fed Jawboning To Come This Week
European stocks, led by the Stoxx Europe 600, rallied due to dovish statements from Federal Reserve officials and anticipation of further economic stimulus from China. Meanwhile, the two-year U.S. Treasury yield saw its most significant drop since late August. The markets appeared to be in a risk-on mood despite ongoing geopolitical tensions in the Middle East. Federal Reserve officials signaled a cautious approach to tightening monetary policy, contributing to market optimism. China is also considering raising its 2023 budget deficit to support economic growth, adding another layer of positive sentiment. However, geopolitical risks and concerns about fiscal policy in the U.S. remain as potential market hazards.
Key events this week:
US wholesale inventories, Tuesday
Fed’s Raphael Bostic, Christopher Waller, Neel Kashkari and Mary Daly speak at separate events, Tuesday
Germany CPI, Wednesday
NATO defense ministers meeting in Brussels, Wednesday
Russia Energy Week in Moscow, with officials from OPEC members and others, Wednesday
US PPI, Wednesday
Minutes of Fed’s September policy meeting, Wednesday
Fed’s Michelle Bowman and Raphael Bostic speak at separate events, Wednesday
Japan machinery orders, PPI, Thursday
Bank of Japan’s Asahi Noguchi speaks, Thursday
UK industrial production, Thursday
US initial jobless claims, CPI, Thursday
European Central Bank publishes account of September policy meeting, Thursday
Fed’s Raphael Bostic speaks, Thursday
China CPI, PPI, trade, Friday
Eurozone industrial production, Friday
US University of Michigan consumer sentiment, Friday
Citigroup, JPMorgan, Wells Fargo, BlackRock results as the quarterly earnings season kicks off, Friday
G20 finance ministers and central bankers meet as part of IMF gathering, Friday
ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva speak on IMF panel, Friday
Fed’s Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 1.5% as of 10:47 a.m. London time
S&P 500 futures rose 0.2%
Nasdaq 100 futures rose 0.2%
Futures on the Dow Jones Industrial Average rose 0.2%
The MSCI Asia Pacific Index rose 1.1%
The MSCI Emerging Markets Index rose 0.7%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.4% to $1.0604
The Japanese yen fell 0.3% to 148.92 per dollar
The offshore yuan was little changed at 7.2976 per dollar
The British pound rose 0.3% to $1.2273
Cryptocurrencies
Bitcoin rose 0.3% to $27,663.76
Ether rose 0.8% to $1,589.09
Bonds
The yield on 10-year Treasuries declined 13 basis points to 4.67%
Germany’s 10-year yield advanced three basis points to 2.80%
Britain’s 10-year yield advanced one basis point to 4.49%
Commodities
Brent crude fell 0.2% to $87.99 a barrel
Spot gold fell 0.2% to $1,857.93 an ounce
Is Bitcoin Evolving?
In case you missed this news in the sea of ‘other’ news, here it is. Robin Linus, a Bitcoin developer focusing on zero-knowledge proofs at ZeroSync opened a very interesting door for Bitcoin development. Robin has proposed a method to enable pretty much any arbitrary computation that requires no consensus changes to Bitcoin. To all my techy followers, here’s a one-sentence explanation from Bitcoin Magazine: “BitVM will bring arbitrary Turing-complete computation, in an enforceable way, to Bitcoin itself – today.”
Below is the first paragraph from the white paper proposing the idea…
By design, the smart contract capabilities of Bitcoin are reduced to basic operations, such as signatures, timelocks, and hashlocks. The BitVM creates a novel design space for more expressive Bitcoin contracts and also off-chain computation. Potential applications include games like Chess, Go, or Poker, and particularly, verification of validity proofs in Bitcoin contracts. Additionally, it might be possible to bridge BTC to foreign chains, build a prediction market, or emulate novel opcodes.
So, this implies that if it works as intended and comes to fruition, Bitcoin can facilitate the deployment of smart contracts, the creation of altcoins, the existence of DeFi, and more. Is this detrimental to everything outside of Bitcoin? My intuition says ‘No.’ Firstly, the notion that this makes everything beyond Bitcoin obsolete is unfounded because, truth be told, a significant portion of altcoins are already without utility. Secondly, Bitcoin enthusiasts understand that Bitcoin's success stems from its first-mover advantage, which cannot be taken away from other altcoins that already boast devoted developers and fan bases.
If anything, doesn't this initiative appear as though Bitcoin is striving to achieve what DeFi has already been successfully accomplishing independently? While I'm supportive of protocol advancements and may indeed back BitVM as I better understand it, it's likely to encounter some resistance within the Bitcoin community, which has maintained a staunch ‘don’t change anything!’ stance for over a decade. I do not believe this development is responsible for the current downturn in the market, and anyone attempting to draw a direct link between the two is perhaps attempting to shape a narrative to align with their own bias. This is unquestionably THE story to watch in the days ahead.
Robert F. Kennedy Jr. Goes Independent
In the entire history of U.S. presidential elections, there has never been an independent candidate who successfully secured the presidency. Given this historical context, it's highly unlikely Robert F. Kennedy's run will be successful. According to the Reuters article linked above, the campaign is expected to see an additional $10 million influx in funding following the announcement and has already raised $17 million with the support of the super PAC American Values 2024.
Irrespective of one's stance on RFK, there's a compelling case to be made for the need for an independent candidate in the U.S., especially considering the sizable silent majority of moderates who lack representation. That being said, the path to achieving this is undoubtedly challenging. Even RFK's own family has publicly disapproved of his move, stating, “Bobby might share the same name as our father, but he does not share the same values, vision, or judgment. Today's announcement is deeply saddening for us.”
Credit must be given to RFK for charting his own course. While it may not guarantee electoral victory, it is poised to have a significant impact on both major political parties. Additionally, RFK's support for Bitcoin carries importance for the crypto community, with hopes that it may influence both major parties in a positive direction. I have no idea who I will vote for, but I will gladly recognize any candidate who supports Bitcoin.
Israel Under Attack | Global Financial Markets Risk Major Uncertainty | Macro Monday
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.